In the world of retirement, patterns in what we buy, how we buy and who we buy from are changing.
We’re just a few clicks away from setting up a pension from brands that were unknown five years.
It’s no longer impossible to imagine pulling out a smart phone, opening an Amazon Finance App and converting a few thousand pounds out of a long-saved pension account into Bitcoin within seconds (subject to a dynamically tailored ‘Retirement Risk Warning’ of course).
While other industries have changed rapidly in response, until recently the retirement market was relatively immune. The Retail Distribution Review, which sought to improve distribution, failed to bring about the expected growth in direct and bank distribution and associated improvement in digital customer experience.
But that sense of immunity looks set to change. We recently found 57 per cent of retirement providers predict that dramatically different propositions will emerge in the near-future.
In a former life I launched an online-only enhanced annuity product in 2013. This provided first-hand experience into a retirement market that was still heavily dependent on the faxing of health questionnaires and telephone-based negotiation.
Since then, ‘Freedom and Choice’ has triggered a long-needed transformation in the world of pensions.
1) Innovate and deliver
Many observers may point to a lack of product innovation in the sector, and the sector itself may highlight the regulatory obstacles and distractions that have prevented this innovation.
But behind the scenes, the changes we’re observing are transformational, from the way firms are using data to understand their customers, to the way they deliver change, to the technology that underpins their propositions.
New skills are in demand. Product actuaries are making way for data scientists. Prince II gurus are passing the baton to Agile Scrum Masters. And IT architects not familiar with service-orientated architecture will soon be unfamiliar with working life.
The FCA recently published interim findings from its Retirement outcomes review. It confirms, what individual retirement providers are experiencing – people raiding pension pots early is ‘the new norm’. But this dynamic is likely to change dramatically over the coming decade as the number of 55-year-olds with substantial defined benefit pension pots decreases.
Research from Old Mutual Wealth, published in 2016, showed that while 50 per cent of retirees currently benefit from a defined benefit pension, the figure for over-50s not yet at retirement is only 34 per cent. The clock is ticking for government, advisers and pension providers to ensure the next generation get the retirement outcomes they’re hoping for.
For some, it might be to make sure enough wealth is left for loved ones. For others, it might be ensuring funding for potential long term care needs. Or it might be the carefree option: a cruise, a car, a second life in the sun. Most likely it will be a combination of the three.